When a company is experiencing financial distress, one option is to place it into liquidation and bring the business to an orderly conclusion. However, in some instances the company may be viable in spite of its current financial difficulties. If there is a realistic chance of being able to rescue the business, the company can be placed into administration, a process which ultimately looks to save a company through a process of financial and operational restructuring.
As with all formal insolvency processes, a licensed insolvency practitioner will need to be appointed, and in the case of administration, they will assume control of the company while a way forward is plotted. Administration is not right for every company, however, when it is deemed to be appropriate, it can be a powerful process which can help save a company, protect employees, and mitigate creditor losses.
Not every company is able to be placed into administration; it must serve a point and be able to satisfy one of three statutory aims:
The company is granted a moratorium. This is a powerful legal ringfence which is placed around the company preventing creditors from commencing any litigation action. The moratorium provides the breathing space needed for the administrator to assess the position of the company and for a plan to be developed which will meet the aims of the administration.
Director Redundancy Entitlement – Did you know that as a limited company director, you may be entitled to claim redundancy if your company enters into an insolvent liquidation process? We can point you towards a fully regulated third party who can provide advice on your right to claim director redundancy if this is applicable to your situation. To understand if you are entitled, give a member of our team a call on 0800 063 9262, or email [email protected].
Remaining in administration is not a long-term solution for a company; administrators are required to adopt the employment contracts of the company after 14 days, and they are also not able to run the company at a loss and worsen the position of creditors. Sooner or later therefore, the company will have to exit administration and the safety this provides.
A company can exit administration in a variety of way depending on the long-term objectives for the business.
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A company cannot remain in administration indefinitely, however, there is not one sole route out of administration.
A company going into administration does not necessarily mean that the business will cease to exist; in fact, rescuing the company as a going concern is often the main objective.
When a company enters administration, it is granted a temporary moratorium. A moratorium can be seen as a legal ringfence which is placed around the company, preventing creditors from initiating litigation proceedings.
A pre-packaged – or pre-pack – administration process involves the sale of a company to either a connected or unconnected party.
Administration is a formal insolvency procedure, which is often used to bring about the rescue of a business experiencing financial problems.
At UK Liquidators, our service is fully partner-led and your case will always be overseen by a fully licensed insolvency practitioner.
If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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